What is Bitcoin/Cryptocurrency?
“Cryptocurrency is a digital currency that is managed by using one of the most advanced encryption techniques called cryptography to secure its transactions. Bitcoin was the first decentralized cryptocurrency which was created in 2009.”
Bitcoin is crushing the markets with its high evaluations and a lot of interest from general people. It is not the only one, there are now a plethora of cryptocurrencies being traded in the not so traditional market place. These are being traded on special platforms exclusively for the cryptocurrencies. There is overall a general excitement about the whole cryptocurrency industry if you will categorize it so.
While these are highly secure transactions there is a darker side to the whole story as well. This is without even looking at the rapid fluctuations in the pricing of these or how many new forms they are coming in.
We are listing some of the not so easily discussed or discovered factors that may not be great for general acceptance of these.
1. Inefficient for retail –
The cryptocurrency transactions as based on the blockchain technology which is a mutual agreement based system where a ledger is shared and updated at multiple places and validated. This makes the system very slow for retail transactions. Cash and Cards are so much fast.
2. Unregulated Market –
The current market for cryptocurrencies is not regulated and therefore very difficult to track. This may lead to financial chaos if all transactions are beyond the control of regulators.
3. Power Inefficiency –
Electricity is a pricey commodity till we go completely to renewal sources or energy and crypto currency mining takes loads of it. It takes almost 25% of the miner’s revenue. In Indian context to mine a bitcoin, it would take almost INR 180000 worth of electricity. So if the Indian economy were to run completely on bitcoins all the worlds electricity would not suffice to support the transactions.
4. Parallel Economy –
When you can’t track the money it becomes very popular with a certain set of people in society. Such money can be easily used for transactions that are not legal. Using it on Dark Web, Money Laundering, ransom demands are just a few of those use case. These are similar problems we had with Cash economy so even being digital this is not really solving the problem.
We are not the naysayers the blockchain as a technology is great and can be used for financial transactions as well however it was not designed for a day to day transaction based use cases. There are definitely the benefits and they should be considered for each use case separately.